Energy Tomorrow Blog
Posted August 12, 2015
Add MIT professor and former CIA director John Deutch to the bipartisan list of those calling for an end to the ban on U.S. crude oil exports.
Deutch, a National Petroleum Council member who served in a number of posts during the Carter, Clinton and Obama administrations, argues in the Wall Street Journal that exporting domestic crude would grow U.S. jobs and increase American influence in world oil markets. Deutch writes:
The bottom line is that the U.S. has the potential to export large amounts of oil and refined products.
Posted August 11, 2015
The U.S. Commerce Department’s recent mid-year trade report illustrates how surging domestic oil and natural gas production is helping our economy – and strongly suggests what increased domestic output could do if U.S. crude oil and liquefied natural gas (LNG) had unhindered access to global markets.
According to Commerce, the U.S. trade deficit among petroleum and petroleum products fell 56.1 percent the first six months of this year compared to the first six months of 2014 (exhibit 9). That growth helped hold the total U.S. year-over-year trade balance steady, even as the trade deficit in non-petroleum products increased 23.1 percent. API Chief Economist John Felmy:
“Despite a very competitive global market, the U.S. energy revolution continues to push our trade balance in a positive direction. Oil imports remain on the decline, and strong exports of petroleum and refined products are creating new opportunities for America to bring wealth and jobs back to U.S. shores.”
For that trend to continue, though, the United States must pursue energy trading opportunities with the same vigor it pursues trade in other areas. A 1970s-era ban on crude oil exports should be lifted, and LNG export projects should be approved by the government so that domestic producers have every chance to access global markets.
Posted August 4, 2015
Something we hear frequently (and too often from people who should know better), is that as long as the United States is an oil importer it shouldn’t export domestic crude. It sounds logical and certainly makes for a good headline. But the idea ignores reality and sound economic analysis.
A quick skim of government data on U.S. trade shows that goods imported into the United States are often goods that also are exported from the United States. The fact is that oil is traded globally, and the ebbs and flows of global supply affect us here in the U.S. Bruce Everett, who teaches oil market economics at Tufts University, explained in a recent article for Politico:
… it’s certainly true that the US will still require imported oil for the foreseeable future to meet our needs. But the implication here is that exporting US crude oil would increase our import needs and therefore undermine national security. And that’s not how the oil market works. The US has an open economy, and American consumers pay world prices for oil – just as they do for wheat, corn, copper, gold and other internationally traded commodities. Crude oil is sold in a single, integrated global market. If the world oil price spikes, the US will suffer, along with everyone else, to the extent we rely on the global market for imports. But exporting some domestically produced oil would not affect this equation.
Energy isolationism isn’t in the United States’ best interest – economically or from a security standpoint. While some argue that shutting in U.S. crude oil is better for America, that kind of faulty thinking ignores the way free markets work – and can work to America’s benefit if we lift the ban on exporting domestic crude.
Posted July 30, 2015
We’ve stressed the economic benefits of lifting the ban on U.S. crude oil exports – GDP growth, job creation and consumer savings – because they’re considerable and would affect virtually every American in a positive way. No less important are the benefits for American security and foreign policy from letting U.S. crude trade freely in the global marketplace. API President and CEO Jack Gerard:
“Experts across the academic and political spectrum agree that American exports would spur greater U.S. oil production, put more oil on the world market, and reduce the power that foreign suppliers have over our allies. Our ability to strengthen the global energy market against future disruptions will shape events around the globe, adding a key tool to America’s diplomatic arsenal.”
Posted July 29, 2015
The current crude oil export debate basically is about global competition – and whether the United States will stop sanctioning itself and let an American commodity trade freely on the global market.
An irony – we’ll call it the “Iran Irony” – underscores the anti-competitive nature of our outdated ban on oil exports and the strategic shortsightedness of maintaining it.
The “Iran Irony” is this: While the U.S. advances a nuclear deal that would let Iran reemerge as a major oil supplier on the global market – to Iran’s economic and competitive gain – the United States denies itself similar benefits by banning its own crude exports. This is hurting America’s global competitiveness, diminishing the potential positive impacts of America’s rise as an energy superpower.
Posted July 14, 2015
A potential nuclear deal with Iran that would permit the Iranians to resume exporting crude oil to global markets – short-term and long-term – underscores questions about our own oil export policies. Here are two: What are the implications of Iranian crude oil exports for U.S. production? And: When will our government lift de facto sanctions against the export of U.S. oil?
Bloomberg reports that Iran’s oil minister says the country can increase exports by 500,000 barrels a day as soon as economic sanctions are lifted, then an additional 500,000 barrels a day in the following six months. Richard Nephew of Columbia University’s Center on Global Energy Policy is less optimistic about that kind of ramp-up. The U.S. Energy Information Administration (EIA) has said Iran could reach 700,000 barrels per day by the end of 2016.
The point is, if there’s a nuclear deal that lifts economic sanctions against Iran, Iranian oil will be getting to market.
Posted July 10, 2015
The compelling case for lifting America’s decades-old ban on exporting domestic crude oil is multi-faceted.
There's the economic case, with NERA Economic Consulting estimated that lifting the ban could add $200 billion to $1.8 trillion to the U.S. economy between now and 2039. There's the case for consumers, with a variety of studies indicating that lifting the ban could lower prices at the fuel pump from 1.7 cents per gallon to up to 12 cents per gallon. There's the foreign policy case and the way home-grown crude oil could affect global relationships, helping allies and potentially neutralizing the ability of adversaries to use energy as a diplomatic weapon. Then there's the energy case. Domestic production, spurred by greater access to global crude markets, could grow by 2.1 million barrels per day to 4.3 million barrels per day over levels under the status quo, according to NERA.
Certainly, each of these was argued again at a pair of Capitol Hill hearings, one by the House Agriculture Committee (video) and another by the Energy and Commerce Committee’s Energy and Power Subcommittee (video).
Posted July 7, 2015
Roll Call (Reps. Joe L. Barton and Henry Cuellar) – The advantages of lifting the ban on crude oil exports are not just theoretical talking points discussed in the halls of Congress, but rather supported by a large and growing body of research by government agencies, academic institutions and think tanks across the political spectrum. The latest is a study released by the Harvard Business School and the Boston Consulting Group. It highlights the obvious benefits lifting the ban will have on American families and businesses, our economy and global allies.
The study discusses the changing U.S. energy landscape and the opportunities made possible by America’s new energy abundance. The fear of a crippling dependence on foreign oil that existed in the 1970s, when the export ban was put in place, is no longer applicable today. In fact, the U.S. is now the world’s top petroleum producer largely due to our recent ability to produce oil and natural gas from shale formations. The world has changed drastically in the past 40 years and it is time for our policies to accurately reflect the current conditions in which we now live. We must embrace the United States’ new leading role on the world energy stage and recognize the value it would create in our everyday lives.
Posted June 23, 2015
Fuelfix.com – President Barack Obama “understands” the argument for exporting U.S. crude, a leading Democratic advocate said Monday.
“He understands,” Sen. Heidi Heitkamp, D-N.D., said on CNBC’s “Squawk Box.” “He is in that category of understanding. I think his State Department understands how significant this could be to soft power. I think his Energy Department understands that this is bad economics and bad for the resource.”
Heitkamp stressed that she couldn’t speak for the administration, but added that “at the highest level, they understand this policy is not a good policy.”
Still, when it comes to the politically treacherous subject of widely exporting U.S. oil — which has been under heavy restrictions since the 1970s — “everybody wants to get together and . . . make a bipartisan decision to do this,” Heitkamp added.
Posted June 22, 2015
Wall Street Journal (Hamm) -- Amid news of a pending nuclear deal with Iran, some OPEC countries have struck agreements with refineries in Asia to avoid losing market share when Iranian oil comes back on the market. If U.S. policy will allow Iran to export oil, shouldn’t it allow America to do the same? Clearly, our allies would rather get their oil from America than Iran if given the choice. But without the ability to export, the U.S. is not even in the game.
Congress must lift the ban on U.S. crude oil exports. The ban is a terrible relic of the Nixon era that harms the American economy. As Sen. Lisa Murkowski (R., Alaska) has pointed out, restrictions on oil trade effectively amount to domestic sanctions. Combined with a mismatch in refining capacity, the ban on oil exports is creating a significant discount for U.S. light oil at no benefit to anyone except refiners and their foreign ownership. It has cost U.S. states, producers and royalty owners $125 billion in lost revenue in four years, according to industry estimates.
Foreign producers are using their heavy oil—and the U.S. ban on exports—as a weapon against America. Over the past three decades countries such as Venezuela, Mexico, Saudi Arabia and Canada have overtaken U.S. refining capacity to run their heavy crude in American refineries and capture a large portion of the U.S. market. Without firing a shot, they have disadvantaged American oil and interests.